S&P: Utility Contract view positive

Standard & Poor's said it revised the outlook to positive from stable on Utility Contract Funding LLC's $829.3 million of senior secured debt due in October 2016 ($543.7 million outstanding as of July 31, 2011), which is rated BBB.

The counterparties to the project are power purchaser Public Service Electric & Gas Co. (BBB/positive/A-2) and supplier Morgan Stanley (A/negative/A-1).

The action reflects the weaker of the counterparties' unsecured issue-level ratings, and the positive outlook mirrors the outlook on PSE&G's rating.

"The BBB rating on UCF's bonds reflects our view of that UCF will to continue to operate as structured under the original project documents," S&P analyst Theodore Dewitt said in a statement.

The positive outlook power supplier PSE&G's debt reflects the increasing proportion of the utility's lower-risk cash flow contribution to the project's consolidated cash flow profile, according to the agency.

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